What are we looking for
Geopolitical conflict has a way of focusing the mind for investors, especially against a backdrop of noisy markets and shifting expectations. Balanced funds continue to offer a practical solution. At their core, they package equities and fixed income into a single, professionally managed portfolio.
For many investors, that delivers three key benefits: First, diversification. Exposure is spread across asset classes and regions, helping smooth outcomes over time. Second, simplicity. Instead of building and maintaining a multifund portfolio, investors can rely on a single holding. Third, automatic rebalancing. As markets move, portfolios are reset to target weights – enforcing discipline without requiring constant oversight. That combination has kept balanced funds at the centre of Canadian portfolios for decades.
More recently, the arrival of balanced ETFs has made these strategies even more accessible – offering intraday liquidity, low minimums, and seamless implementation through any brokerage account. What was once primarily a mutual fund solution is now available in a more flexible, often lower-cost format.
Costs, in turn, have moved meaningfully lower. Morningstar research shows fees in this category have steadily declined, with mutual fund expenses falling close to 1.3 per cent from roughly 1.5 per cent, while ETF-based balanced solutions have dropped to well below 1 per cent. More broadly, Canadian fund fees have trended lower over time, reinforcing the link between cost and investor outcomes.
With that in mind, I used Morningstar Direct to screen for balanced funds available to Canadian investors that pair strong risk-adjusted performance with reasonable fees. To do so, I screened the universe of now over 1,900 Canadian-listed ETFs for those that Morningstar broadly classifies as “balanced” or “allocation” products (meaning they hold some mix of stocks and bonds) and have:
- received a five-star Morningstar Rating for Funds (Star Rating), indicating historical outperformance versus peers (which include both mutual funds and ETFs) on an after-fee, risk-adjusted basis. The rating incorporates up to 10 years of performance history, with greater weight placed on the most recent three years. Noting importantly that five stars place these funds in the top 10 per cent of performers after adjusting for risk and fees.
Or
- a Morningstar Medalist Rating of Gold, reflecting Morningstar’s forward-looking view that the fund has the ingredients to outperform peers on an after-fee basis. This assessment incorporates our evaluation of parent (stewardship quality), people (portfolio management experience), and process (the robustness and repeatability of the investment approach).
Only Canadian-domiciled ETFs were considered in today’s screen. By no means is an exhaustive list, but merely a good starting point for further research.
What We Found
The ETFs that met the above requirements are listed in the table accompanying this article alongside tickers, management expense ratios, trailing performance, inception dates, and asset allocations. Importantly, readers should note the category to which each fund belongs. Broadly speaking, Canada’s fund category system divides this universe of funds into three buckets based on asset allocations, setting an upper limit of 40 per cent fixed-income balanced, 60 per cent neutral balanced, and 90 per cent equity balanced in stocks. Conservative investors (or those who have a short time period until which they must start withdrawing funds) might consider funds with lower exposure to stocks, while investors with a longer time horizon might consider the opposite.
This article does not constitute financial advice. Investors are urged to conduct their own independent research before investing in any of the ETFs listed here.
Ian Tam, CFA, is director of investment research for Morningstar Canada.